February 19, 2009
Autopsy for the Celtic Tiger
How Ireland Went Bust
By HARRY BROWNE
The unemployment rolls in the Republic of Ireland are growing by more than 30,000 per month. It might not sound like a lot, but on a straight per-capita comparison, in a state of some four million people, that’s more than three times worse than what’s been afflicting the US.
This little country is going to hell in a turbo-charged handbasket.
In a country notorious for self-conscious postcolonial agonising about its essential national character, this precipitous collapse has come both as body-blow and fuel for nonsensical palaver. Pundits who would prefer not to dwell on the mechanics of the fall have wondered if perhaps we’re still the work-shy and law-averse rogues of ancient stereotype, if our brief transformation into the entrepreneurial engine of the new millennium wasn’t a mere chimera.
The rise and fall of the Irish economy have of course had more solid material and ideological causes, little to do with “who we are as a nation”. When I moved to Dublin in 1985 it was still common to hear speculation as to whether this were a First or Third World country. The “open economy” strategy that was launched in the 1960s only bore serious fruit a quarter-century later, when multinational growth industries such as tech and pharmaceuticals saw Ireland as a useful offshore haven, with low taxes, state grants, low rates of unionisation and a reasonably well educated, English-speaking workforce. Often companies cooked the international books to locate their profits here.
Ireland, in truth, has been something like a region of the US economy that had privileged access to European Union markets. In the 1990s, with help from a friendly White House deeply involved in the Northern ‘peace process’, we got rich by selling Intel chips, Dell laptops and Viagra tablets to our EU partners, while still benefitting from EU funds to improve our infrastructure. When that boom levelled out after 2001 we could still thrive on the new sources of cheap labour that the EU’s expansion to the east has offered. Dublin parishes offer masses in Polish; fishy Baltic delicacies hide behind obscure shopfronts; in some pubs vodka is more popular than Guinness. But much of the growth in this latter period, and much of the employment for our eastern friends, was fuelled by a mad property bubble, which saw government, developers and banks collude in a conspiracy that clearly bordered on criminal, and occasionally seems to have crossed the border, in order to build houses, apartments and offices that may never be occupied. Financial “innovation” also played its part: Dublin, with its low and lax approaches to taxation and regulation, became home, at least nominally to nearly a third of the world’s hedge funds.
Fortunes were made, to be sure: it was not unusual to see a house increase by five-fold in price in the space of seven or eight years. But now that the bubble has burst, the most criminal of the banks--Anglo-Irish Bank, which became a Ponzi-like scheme for a golden circle of developers who benefited from all sorts of state patronage and tax breaks--has become property of the State, and billions of public euro have been poured into the larger banks to keep them afloat. This week we learned that Anglo-Irish made “loans” totalling 300 million euro ($380 million) to its friends last year in return for the recipients buying shares in the bank to prop up its share-price. It’s not exactly a conspiracy that will restore faith in the cleverness of our ruling elites, since the share-price nonetheless slid quickly into oblivion. But hey, it wasn’t exactly risky: no one is going to being chased for the money, and now we all own the bank.
Twenty years of neoliberal policies, 15 of them accompanied by rapid economic growth, have left the country with an exceptionally low debt by international standards. For all the good it’s done us: now that Ireland needs to borrow, international lenders are loath to lend, fearing our banks’ unplumbed exposure to toxic property lending. Our government can borrow only at rates 2 per cent higher than what Germany faces, and insuring its loans entails an additional extra expense.
Not that the Irish government is very keen to borrow. In the face of the hope-filled Keynesian examples of Gordon Brown and Barack Obama, the Irish government is nonetheless inclined to cut, cut, cut--except for a few long-planned “development” projects that could aid its beloved and near-broke construction industry. Public sector employees (that includes college teachers like me) are facing pay-cuts of between 6 and 9 per cent. They’re calling it a “pension levy”--don’t even ask about how pension funds are faring here, home of the western world’s worst-performing stock-market over most of the last 18 months--but it applies even to employees without pension entitlements.
Why borrow, the politicians figure, when prosperity here has been founded on, first, multinational (largely US) investment and, then, bubblenomics. These are not only irretrievable and unsustainable, but they ensure that recovery cannot possibly be funded by a few hundred thousand public servants who retain the disposable income to go out to a restaurant. (Actually, many people with the cash to fill the car’s tank are shopping across the border in Northern Ireland, where lower sales tax and a favourable exchange rate with sterling mean there are deals to be found.) Neoliberalism has taken the economy well and truly out of our hands.
What did we get during the good years in exchange for our elites’ Faustian bargain with globalisation? Longer commutes, longer working hours, high prices, higher indirect taxes to make up for the low taxation on corporations and the rich; a lower share of the wealth for workers, as union leaders signed on for a shrinking piece of a growing pie in ‘social partnership’ negotiations that guaranteed industrial peace for the sake of ‘the economy’. And, yes, we did get better food, bigger cars, ever-more-exotic vacations…
A health service that was decimated by cuts in the first wave of Irish neoliberalism after 1987 is still a wreck, despite better funding in the last decade, because it has been dominated by corporate thinking and the government’s desire to help private developers to profit from healthcare provision. One thin thread of silver among the prevailing dark clouds is that much of that private investment is drying up; only the government’s least popular cabinet member, health minister Mary Harney (whose right-wing Progressive Democrat party has evaporated and who serves now as a non-party independent), stands in the way of a more egalitarian approach to health, but crucial years and billions of euro have been lost to her Americanized, profiteering two-tier system.
Another source of schadenfreude is the fate of the Green Party, who jettisoned a few barrels-full of core principles in order to join the government coalition in 2007, before the crisis hit. Their reward this year will be, at least, a spanking from the voters in local and European-parliament elections; the possibility of the government collapsing and that spanking being extended to a sudden general election looks less remote as the public-service unions, in particular, plot an aggressive season of industrial action. The Greens will, of course, be able to point to one piece of good news, of the only sort that seems to matter to them: a reduction in carbon emissions--massive contraction in the economy will do that for you. (The latest estimate is 6 per cent shrinkage in 2009, but no one is confident it won’t be considerably worse.)
Three-and-a-half years ago Tom Friedman came to Dublin for the New York Times to sing the praises of the Celtic Tiger. In an article headlined “The End of the Rainbow”, he wrote that Irish success was, as far as he was concerned, a tribute to the rules of sound globalization, including a little investment in education and social partnership, but mostly “make your corporate taxes low, simple and transparent; actively seek out global companies; open your economy to competition; speak English; keep your fiscal house in order”, that sort of thing.
At the time, in 2005, Friedman chose three particular heroes of the new Ireland to interview: Michael Dell of the US computer giant, Ireland’s largest exporter (last month Dell announced it was shutting its Limerick plant, putting 2,000 people out of work directly and devastating the region); James Jarrett, an Intel vice-president (this week Intel announced it was seeking up to 300 lay-offs at its Kildare ‘campus’); and Mary Harney (who is now desperately hoping for a plum job in the EU to rescue her from her failed programme and the collapse of her party). In a second article, “Follow the Leapin’ Leprechaun”, Friedman praised the way Ireland had made it easier to fire people, and said he was betting on Ireland’s new “social capitalism” against the “welfare capitalism” of France and Germany.
Sorry, Tom, you lose. If you were going to insist on adopting the clichéd and patronizing image of the leprechaun to tell the story of 21st-century Ireland, you might at least have realized that the little people tend to make fools of us mere mortals.
Harry Browne lectures in the School of Media at Dublin Institute of Technology and is author of CounterPunch’s Hammered by the Irish. Contact firstname.lastname@example.org